DALLAS (CN) – A Lubbock businessman pleaded guilty to federal felony charges of defrauding 250 investors of $50 million in a Ponzi scheme. Benny Lee Judah, 50, took the money by selling Excel Lease Fund debentures.
Judah, who operated restaurants and other businesses, ran the scam from October 2005 until April this year, when the SEC sued him and a federal judge froze his assets and appointed a receiver.
Judah pleaded guilty to money laundering and selling unregistered securities. He faces up to 20 years in prison and a $250,000 fine for money laundering and 5 years and another $250,000 fine for securities fraud.
As part of the plea agreement, he agreed to pay restitution of $48.4 million, and admitted he stole $50.2 million.
“As part of his scheme, Judah misrepresented the viability of Excel by failing to disclose the true and actual use of investor funds, and the true financial condition of Excel, thus allowing him to conceal, disguise and convert investor monies for unauthorized purposes,” the Department of Justice said in a statement.
“He generated false documents consisting of prospectuses, balance sheets, income statements and interest accrual letters that were represented to be true in order to perpetuate the image of a successful company. He mailed these fraudulent documents to investors and received approximately $50,162,707. He represented to investors that Excel was profitable, when it was not, and grossly overstated the value and nature of Excel’s assets.”
Judah mailed false account statements to the investors showing that their investments were earning interest at the 10 percent rate he had represented. Regarding the money laundering charge, Judah knew his scam reaped him money through mail fraud.
He also admitted using investors’ money in a manner grossly inconsistent with his promises. He lost at least $5 million by day trading and “loaned” his victims’ money to himself and his businesses.
And he did it in defiance of a 2001 permanent injunction from the SEC against him and Excel, and $50,000 fines for each of them.
The SEC often seeks injunctions against people who violated injunctions.
A debenture is a debt secured only by the issuer’s presumed future earnings, not by a lien on any assets.
U.S. District Judge Sam R. Cummings ordered a pre-sentence investigation and will set a sentencing date when he gets it.